24H1 revenue increased slightly, and net profit to mother increased year-on-year

Tianneng Co., Ltd. released an interim report. In the first half of 2024, the company achieved revenue of 21.622 billion yuan, +0.3% year on year; net profit to mother of 1.194 billion yuan, +9.32% year over year, after deducting net profit of 0.751 billion yuan without return to mother, + -17.30% year on year. Considering the growth rate of demand for lead-acid batteries in the company's main business and the slowing pace of progress in the new lithium battery business, we lowered our revenue growth forecast. In addition, considering the rise in lead prices, we lowered our gross margin expectations to 2.66, 3.00, and 3.80 yuan for 2024-2026 (previous values 2.77, 3.45, and 4.12 yuan for 2024-2026). Referring to a 24-year average PE of 12.37 times, the comparable company Wind agreed to give the company 12.37x2024PE, corresponding to a target price of 32.90 yuan (previous value was 36.84 yuan), maintaining a “buy” rating.

Profitability increased in the second quarter compared to the previous quarter

24Q2 revenue was 12.294 billion yuan, +13.77%/+31.8%; net profit to mother was 0.692 billion yuan, +45.71%/+37.85% month-on-month; net profit to mother 5.63%, +1.23pct/+0.25pct month-on-month; net profit without return to mother was 0.602 billion yuan, +59.98%/+303.26%; we think Q2 may have begun to pick up demand in the downstream two-wheeler market. Caused by rising acid battery prices. The cost rate for the 24H1 period was 8.97%, -0.03pct year on year. The company focused on R&D investment. The R&D cost rate was 4.05%, +0.46pct year on year.

Lead-acid battery leader, favorable policies are expected to increase sales

The electric two-wheeler market has relied on various policies since this year, or achieved a high increase in demand for natural replacement. As an upstream battery leader, Tianneng is expected to benefit from the high downstream boom. Tianneng channel+customer+brand barriers are strong. According to the company's announcement, customers include leading companies in the two-wheeler industry, such as Yadi, Emma, TaiLing, Luyuan, Xinri, etc., and the company's industry share continues to grow steadily, and its leading position continues to strengthen; the company actively lays out overseas business, and overseas production and channel construction are beginning to bear fruit. In July, the Vietnamese assembly plant officially completed trial production. As of August, it had signed more than 30 overseas brand dealers. The company's 24H1 overseas sales increased by 34.57% year-on-year.

Actively lay out the product matrix to promote quality through new products

The company is actively developing diverse businesses, including energy storage battery business, sodium battery business, and hydrogen fuel cell business, and has achieved many breakthroughs. In the first half of this year, the company released a next-generation 5MWh smart liquid-cooled lithium battery energy storage system with an energy density greater than 185 Wh/kg, accelerated market development, signed strategic agreements with a number of energy storage construction institutions, and became a supplier for ZTE. In terms of sodium batteries, the company released Tiansodium T2, and launched the NFPP polyanionic sodium battery “Sodium Storage No. 1” using the advanced layered oxide technology route. In addition, vehicles equipped with Tianneng's hydrogen-electric 80kW engine system were listed in the Ministry of Industry and Information Technology's 384th batch of product announcements.

Risk warning: the progress of capacity expansion falls short of expectations; the risk of increased market competition; the risk that the industrialization of new technology falls short of expectations; the risk of a sharp rise in raw materials.